Singapore SMEs Show Resilience Amid Economic Uncertainties

Singapore's small and medium-sized enterprises (SMEs) have maintained an expansionary trajectory into the third quarter of 2026, as indicated by the OCBC SME Index, which rose to 51.9 from 51.3 in the previous quarter. A reading above 50 signifies increased business activity, while below 50 indicates contraction. This index is based on transactional data from over 100,000 SME customers of OCBC Bank, which includes businesses with annual sales turnover of up to S$30 million (approximately USD 22 million).

Despite this positive trend, the outlook for SMEs remains uneven across various sectors, reflecting disparities in cost structures, productivity, and technology adoption. Elaine Heng, head of global commercial banking at OCBC, said that SMEs that are better able to capture emerging opportunities ahead will be those that are able to manage costs and margins, invest in improving productivity, and leverage technology to differentiate themselves.

The expansion in Q3 was particularly strong in outward-oriented sectors, while growth in domestically focused sectors was more subdued. In a recent poll conducted in September, 35% of SME owners reported improved business conditions compared to June, a slight increase from the previous quarter. Notably, 45% of outward-oriented SMEs expressed optimism about their business outlook, compared to 39% of those focusing on domestic markets.

“SMEs that are better able to capture emerging opportunities ahead will be those that are able to manage costs and margins, invest in improving productivity, and leverage technology to differentiate themselves.”Elaine Heng, Head of Global Commercial Banking, OCBC

OCBC noted that resilient external demand, supported by a technology and electronics upcycle, continues to create opportunities for SMEs involved in regional trade and supply chains. However, geopolitical uncertainties, particularly those stemming from the Middle East conflict, have raised concerns about rising operational costs. The bank indicated that while SMEs have shown resilience, they are grappling with elevated costs related to energy, logistics, and manpower. High oil prices have further exacerbated these pressures.

In terms of financial performance, SME payments rose by 19.3% year-on-year, and collections increased by 18.6%. However, OCBC cautioned that the growth figures may partly reflect rising prices rather than a pure increase in business activity. The bank estimates that Singapore's GDP growth for Q3 2026 will be around 5.3%, aligning closely with the Ministry of Trade and Industry's advance estimate of 5.4%.

Looking ahead, the mixed sentiment among SMEs suggests that while some sectors are thriving, others face significant challenges. The ongoing geopolitical tensions may continue to influence operational costs and market dynamics, potentially impacting the overall business environment for SMEs in Singapore.